Correlation Between DXP Enterprises and EVI Industries

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Can any of the company-specific risk be diversified away by investing in both DXP Enterprises and EVI Industries at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining DXP Enterprises and EVI Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DXP Enterprises and EVI Industries, you can compare the effects of market volatilities on DXP Enterprises and EVI Industries and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in DXP Enterprises with a short position of EVI Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXP Enterprises and EVI Industries.

Diversification Opportunities for DXP Enterprises and EVI Industries

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between DXP and EVI is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding DXP Enterprises and EVI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVI Industries and DXP Enterprises is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on DXP Enterprises are associated (or correlated) with EVI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVI Industries has no effect on the direction of DXP Enterprises i.e., DXP Enterprises and EVI Industries go up and down completely randomly.

Pair Corralation between DXP Enterprises and EVI Industries

Given the investment horizon of 90 days DXP Enterprises is expected to generate 1.05 times more return on investment than EVI Industries. However, DXP Enterprises is 1.05 times more volatile than EVI Industries. It trades about 0.15 of its potential returns per unit of risk. EVI Industries is currently generating about 0.12 per unit of risk. If you would invest  5,360  in DXP Enterprises on August 31, 2024 and sell it today you would earn a total of  1,933  from holding DXP Enterprises or generate 36.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

DXP Enterprises  vs.  EVI Industries

 Performance 
       Timeline  
DXP Enterprises 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in DXP Enterprises are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DXP Enterprises exhibited solid returns over the last few months and may actually be approaching a breakup point.
EVI Industries 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in EVI Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, EVI Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

DXP Enterprises and EVI Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DXP Enterprises and EVI Industries

The main advantage of trading using opposite DXP Enterprises and EVI Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXP Enterprises position performs unexpectedly, EVI Industries can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in EVI Industries will offset losses from the drop in EVI Industries' long position.
The idea behind DXP Enterprises and EVI Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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